I’m still trying to sort this out – but I already know I don’t like it. Governor Bob Riley called the Alabama legislature into Special Session this week – it starts Monday August 10. The special session is to consider re-instating Jefferson County’s currently illegal Occupational Tax. Gov. Riley wouldn’t have called a special session costing hundreds of thousands of dollars if he wasn’t confident that the legislature would re-instate the tax, probably with ‘accountability’ measures like a County Administrator:
…the tax bill would impose a 0.45 percent occupational tax on the wages of everyone who works in Jefferson County, with no exceptions… The tax rate now is 0.5 percent on many workers, but doctors, lawyers and others who pay license fees to the county or state are exempt from the tax.
A circuit judge in January struck down the occupational tax, ruling it was illegal. The county still is collecting the tax while it appeals the ruling, but the county cannot spend the collected money.
Here is post from the Birmingham Business Law Blog summarizing the situation:
Jefferson County is on the verge of a financial meltdown. The cause, however, is not the escalating sewer bond debt. It is the loss of the occupational tax… While (Judge Rains’) opinion allowed the continued collection of the tax, it required the proceeds to be placed in an escrow account. Jefferson County appealed Judge Rains’ decision to the Alabama Supreme Court as well as petitioned Judge Rains for use of some of the occupational tax funds. In March, Judge Rains ruled that the county could spend occupational taxes collected through May 18, 2009. Not coincidentally, that date was the day after the end of the regular legislative session. Accordingly, the Alabama legislature had to pass a new occupational tax for Jefferson County by the end of the legislative session or the county would be without 26 percent of its general fund resources. The county projected during the session that the loss of the tax would cause the county to run out of money sometime in August.
An occupational tax is usually like a business license. This is more like a local income tax you pay for the privilege of working in a certain place, even if you don’t live there. I hate that – it’s taxation without representation. Here’s some background:
Counties in Alabama have limited taxing power – only what the Legislature allows.
A law passed in 1967 gave the Jefferson County Commission the right to impose taxes on wages and business licenses.
But commissioners wouldn’t create an occupational tax until two decades later, when the commission was under a federal court order to build a new jail and believed no financial help would come from the Legislature.
The new tax took effect Jan. 1, 1988.
Critics of the tax said it was fundamentally unfair. The 1967 law specifically exempted professionals such as doctors and engineers who already paid a state license fee.
That meant lawyers could avoid the tax but their secretaries couldn’t. Nor could judges. Fortune tellers were exempt; bank tellers weren’t. Private detectives were exempt; police detectives were not.
The issue of who should pay touched off the first flurry of litigation, setting the stage for a brutal political fight.
On Nov. 12, 1998, Circuit Court Judge John Rochester struck down the tax and ordered a new version that applied to all workers.
What a bad law that was. But then this is what passes for logic in Montgomery from State Representative John Rogers, D-Birmingham):
His bill, Rogers said, is the only one with enough bipartisan support to pass. “Nobody really likes it, so that means it’s probably a good bill,” he said.
The legislature should also consider that if “Nobody really likes it” maybe it’s just a really bad law.
No wonder the occupational tax has been in litigation since it was enacted. No wonder the tax was overturned in court (but no refunds for taxpayers who’ve been paying an illegal tax for years). Here’s more background on the Jefferson County Occupational Tax. And here is what the Birmingham Business Law Blog had to say about the case brought before Judge Rains, with lots of lawyer words and citations. The Alabama Supreme Court is scheduled to hear arguments about the Occupational tax case starting August 18 (JeffCo appealed Rains’ decision).
Jefferson County really needs the money (that’s what they all say, anyway). People have gone to jail and many more need to go to jail for public corruption. The County wasted money and got screwed by their investment bankers. They’re still building a domed stadium at the BJCC – how much of this crisis is gamesmanship and posturing?
But this is an illegal income tax – only the State can levy an income tax and that rate is set by the Alabama Constitution (currently maxed out by the State, of course). Since the legislature is meeting in a special session, there is an urgency to do something. Chances are, what they do will be the wrong thing.
If you want it bad, you get it bad.